Tag: AVMs

#1 AVM in Each County Updated for Q3 2023

Every quarter we analyze all the top AVMs and compile the results. Click on this GIF to see the top AVM in each county for each quarter. As you watch the quarters change, you can see that the colors representing the top honors change frequently.

map of the united states cycling between 8 images showing a different color for each AVM that is #1 in the county. The colors change rapidly and substantially indicating a very dynamic market where leadership as "the best AVM" changes a lot.
Q3 2023 update

The main point is how frequently AVM performance changes. That should be no surprise, since market conditions change, and AVM’s have different strengths and tendencies. Phoenix has more tract housing, and some AVMs are optimized for that. Cities in the northeast have more row housing, and some models are better there. But AVMs also change – a lot. Whole new models are introduced, but every model is constantly being improved as builders add new data feeds and use new techniques to get better results (with respect to new techniques, over at the AVMNews, we curate articles about AVMs, and we highlight several dozen new research articles about AVMs every year).

Q3 Change Highlights

As ever, if you watch a part of the map, you’ll see several changes. But, in Q3, as markets stabilized at higher interest rate levels, we saw a changing of the guard. Here are some places to watch:

  1. On the the west coast, leadership changed in Orange County and many smaller counties.
  2. Several less-populated states had almost wholesale changes, such as the Dakotas, Montana, New Mexico and Mississippi.
  3. Dozens of suburban counties changed around other metro areas, from Houston and Dallas to Chicago and D.C.

Takeaways

Things change – a lot. Don’t rely on the results from last year or earlier this year. Heck, you can’t even trust last quarter! We compile these results quarterly, but our testing is non-stop, and we can produce new optimizations monthly based on a rolling 3 months or any other time period. Often, 3 months’ of data are required to get a large enough sample in smaller regions, but we can slice it every way imaginable.

Use more than one AVM. It’s not obvious from a map showing just one AVM in each county, but if you think about what’s going on to produce these results, you’ll realize that AVMs have different strengths and there are a lot of them climbing all over each other to get to the top of the ranking. So, when you’re valuing a particular property, you just don’t know if it will be a good candidate for even the best AVM. When that AVM produces a result with low confidence, there’s a very good chance that another AVM will produce a reasonable estimate. Why not be able to take three bites at the apple?

#1 AVM in Each County Updated for Q2 2023

Every quarter we analyze all the top AVMs and compile the results. This GIF shows the top AVM in each county for each quarter, and as it spools through the quarters, you can see that the top honors change hands frequently.

map of the united states cycling between 8 images showing a different color for each AVM that is #1 in the county. The colors change rapidly and substantially indicating a very dynamic market where leadership as "the best AVM" changes a lot.
Click the image to see the GIF cycle between quarters.

The main point is how frequently AVM performance changes. That should be no surprise, since market conditions change, and AVM’s have different strengths and tendencies. Phoenix has more tract housing, and some AVMs are optimized for that. Cities in the northeast have more row housing, and some models are better there. But AVMs also change – a lot. Whole new models are introduced, but every model is constantly being improved as builders add new data feeds and use new techniques to get better results. (With respect to new techniques, over at the AVMNews, we curate articles about AVMs, and we highlight several dozen new research articles about AVMs every year.)

Q2 Change Highlights

As ever, if you watch a part of the map, you’ll see several changes. But, in Q2, as markets stabilized at higher interest rate levels, we saw a changing of the guard. Here are some places to watch:

  1. On the the west coast, leadership in Los Angeles, Silicon Valley and Seattle changed.
  2. Almost all of the Rocky Mountain states changed.
  3. Most of the counties around Washington D.C. and New York City changed. 

Takeaways

Things change – a lot. Don’t rely on the results from last year or earlier this year. Heck, you can’t even trust last quarter! We compile these results quarterly, but our testing is non-stop, and we can produce new optimizations monthly based on a rolling 3 months or any other time period. Often, 3 months’ of data are required to get a large enough sample in smaller regions, but we can slice it every way imaginable.

Use more than one AVM. It’s not obvious from a map showing just one AVM in each county, but if you think about what’s going on to produce these results, you’ll realize that AVMs have different strengths and there are a lot of them climbing all over each other to get to the top of the ranking. So, when you’re valuing a particular property, you just don’t know if it will be a good candidate for even the best AVM. When that AVM produces a result with low confidence, there’s a very good chance that another AVM will produce a reasonable estimate. Why not be able to take three bites at the apple?

Why Mark Sennott’s Whitepaper Stopped Us Cold

At AVMetrics, we have to admit having mixed feelings about Mark Sennott’s recent whitepaper on AVMs. We’re quite grateful for his praise on our testing, which he describes as “robust, methodical and truly independent.” He echoes some of our key concerns:

  • AVMs perform very differently, so it is important to test before using
  • AVM performance changes more frequently than you’d think
  • Everyone should employ a cascade using multiple AVMs, because it dramatically increases the accuracy of the delivered results.

However, there was something quite disconcerting in Mark’s telling of how AVMs are being used. In Mark’s words:

In practice, however, the top performing AVMs, based on independent testing performed by companies like AVMetrics, are not always the ones being delivered to lenders. The reason: self-interest on the part of the AVM delivery platforms who also sell and promote their own AVMs.

This very troubling delta between posture and operating practice had to be confronted first-hand by one of the lenders for which I provide guidance. What at first blush appeared as a straightforward exercise for the lender in vetting a platform provider’s cascade against AVMetrics independent testing results, became a ponderous journey to overcome contractual headwinds against a simple assurance the provider would indeed provide the highest scoring AVM model per AVMetrics recommendations. This was not the first time I experienced this apparent conflict of interest.

Kudos to Mark for writing openly about a practice that many in the industry would probably prefer that he kept quiet about.

#1 AVM in Each County Updated for Q4 2022

Q4’s update is remarkable for the amount of change in the map. Every quarter we analyze all the top AVMs and compile the results. This GIF shows the top AVM in each county for each quarter, and as it spools through the quarters, you can see where the top honors change hands.

Map of the united states in which every county is a color representing the best AVM according to the legend. Every second the map updates to the next quarter, starting in Q1 of 2021 and going through 7 updates to Q4 of 2022. The colors change quite rapidly, showing a lot of dynamism in the AVM rankings.
Click the image to see all eight quarters of 2021 and 2022. The number one AVM in each county is represented by its corresponding color in the legend.

The main point is how frequently AVM performance changes. That should be no surprise, since market conditions change, and AVM’s have different strengths and tendencies. Phoenix has more tract housing, and some AVMs are optimized for that. Cities in the northeast have more row housing, and some models are better there. But AVMs also change – a lot. Whole new models are introduced, but every model is constantly being improved as builders add new data feeds and use new techniques to get better results. (With respect to new techniques, over at the AVMNews, we curate articles about AVMs, and we highlight several dozen new research articles about AVMs every year.)

Q4 Change Highlights

As ever, if you watch a part of the map, you’ll see several changes. But, in Q4, with markets changing significantly as interest rates rose and then fell, we saw a real upending of the order. Here are some places to watch:

  1. Most of the west coast changed from blue to the orange of Model B, except Orange County, ironically, which is tan for Model H.
  2. Seattle and Portland changed from blue to the Model B orange.
  3. Several upper Rocky Mountain states changed from pink to the green of Model K. (Visually it’s striking, but in terms of population, admittedly less important.)
  4. Almost every county in Utah changed.
  5. A lot of rural Texas changed from gray to the blue of Model A, so those guys took some territory back.
  6. But, Model A also gave away leadership in Chicago and the surrounding counties, which went from blue to orange (Model B) or tan (Model H).
  7. New York was completely shuffled. Surprisingly, the same changes held in NY City and upstate: counties changed from orange to blue (Model A got some more back), and those that were green or blue changed to orange or tan.
  8. All the counties around Washington D.C. went from blue to orange (Model B wins again).
  9. Just west of that, in West Virginia, everything changed from blue to the Kelly green of Model AA.

Takeaways

Things change – a lot. Don’t rely on the results from last year or earlier this year. Heck, you can’t even trust last quarter! We compile these results quarterly, but our testing is non-stop, and we can produce new optimizations monthly based on a rolling 3 months or any other time period. Often, 3 months’ of data are required to get a large enough sample in smaller regions, but we can slice it every way imaginable.

Use more than one AVM. It’s not obvious from a map showing just one AVM in each county, but if you think about what’s going on to produce these results, you’ll realize that AVMs have different strengths and there are a lot of them climbing all over each other to get to the top of the ranking. So, when you’re valuing a particular property, you just don’t know if it will be a good candidate for even the best AVM. When that AVM produces a result with low confidence, there’s a very good chance that another AVM will produce a reasonable estimate. Why not be able to take three bites at the apple?

Honors for the #1 AVM Changes Hands in Q3

Graphic showing which AVM was tops in each county over the last 8 quarters. Shows constantly changing colors. 16 or 17 AVMs claim the top spot in at least one county each quarter.
The graphic shows which AVM was tops in each county over the last 8 quarters.

We’ve got the update for Q3 2022. Our top AVM GIF shows the #1 AVM in each county going back 8 quarters. This graphic demonstrates why we never recommend using a single AVM. Again, there are 19 AVMs in the most recent quarter that are “tops” in at least one county!

The expert approach is to use a Model Preference Table® to identify the best AVM in each region. (Actually, our MPT® typically identifies the top 3 AVMs in each county.) Or, you could use a cascade to tap into the best AVM for whatever your application.

This time, the Seattle area and the Los Angeles region stayed light blue, just like the previous quarter. But, most of the populous counties in Northern California changed hands. Sacramento was the exception, but Santa Clara, Alameda, Contra Costa, San Mateo and some smaller counties like Calaveras (which means “skulls”) changed sweaters. Together they account for 6 million northern Californians who just got a new champion AVM.

A number of rural states changed hands almost completely… again. New Mexico, Wyoming, North Dakota, South Dakota, Montana and Nebraska as well as Arkansas, Mississippi, Alabama and rural Georgia crowned different champions for most counties. I could go on.

All that goes to show the importance of using multiple AVMs and getting intelligence on how accurate and precise each AVM is.

 

Honors for the #1 AVM Changes Hands in Q2

The number one AVM in each county over the last 8 quarters. The honors for the best AVM changes hands pretty frequently.
#1 AVM in each county in Q2 2022.

We’ve got the update for Q2 2022. Our top AVM GIF shows the #1 AVM in each county going back 8 quarters. This graphic demonstrates why we never recommend using a single AVM. There are 19 AVMs in the most recent quarter that are “tops” in at least one county (one more than in Q1)!

The expert approach is to use a Model Preference Table® to identify the best AVM in each region. (Actually, our MPT® typically identifies the top 3 AVMs in each county.)

One great example is the Seattle area. Over the last two years, you would need seven AVMs to cover the most populous 5 counties of the Seattle environs with the best AVM. What’s more, the King’s County champion AVM has included 3 different AVMs.

A number of rural states changed hands almost completely. New Mexico, Wyoming, North Dakota, South Dakota, Montana and Kansas crowned different champions for most counties.

All that goes to show the importance of using multiple AVMs and getting intelligence on how accurate and precise each AVM is.

 

AVM Regulation – Twists and Turns to Get Here

The Era of Full Steam Ahead!

Six months before the pandemic, we published an article on the outlook for regulation related to AVMs. At the time, we identified three trends.

  1. The administration was encouraging more use of AVMs (e.g., via hybrids), and tempering that with calls for close monitoring of AVMs.
  2. The de minimis threshold change foreshadowed an increase in reliance on AVMs in some lower value mortgages.
  3. The Appraisal Subcommittee summit was focused on standardization across agencies and alternative valuation products, namely, AVMs. Conversation focused on quality and risk as well as speed.

We saw those trends pointing to increased AVM use balanced by a focus on risk, quality and efficiency.

Sure enough, the following events unfolded:

  1. The de minimis threshold was indeed raised, right before the pandemic changed everything.
  2. The appraisal business was turned upside down for a period during the pandemic.
  3. Property Inspection Waivers (PIWs) took off in a big way as Fannie and Freddie skipped appraisals on a huge percentages of their originations (up to 40% at times).

Halt! About Face!

And then the new administration changed the focus entirely. No longer were the conversations about speed, efficiency, quality, risk and appraisers being focused on their highest and best use. Instead, conversations focused on bias.

Fannie produced a report on bias in appraisals. CFPB began moving on new AVM guidelines and proposed using the “fifth factor” to measure Fair Lending implications for AVMs. Congress held committee hearings on AVM bias.

New Direction

Then The Appraisal Foundation’s Industry Advisory Council produced an AVM Task Force Report. Two of AVMetrics’ staff participated on the task force and helped present its findings recently in Washington D.C.

The Task Force made specific recommendations, but first it helped educate regulators about the AVM industry.

One specific recommendation was to consider certification for AVMs. Another was to use the same USPAP framework for the oversight of AVMs as is used for the oversight of appraisals. It’s all laid out in the AVM Task Force Report.

Taking It All In

Our assessment three years ago was eerily accurate for the subsequent two years. Even the unexpected pandemic generally moved things in the direction that we were pointing to: increased use of AVMs through hybrids.

What we failed to anticipate back then was a complete change in direction with the new administration, and maybe that’s to be expected. It’s hard to see around the corner to a new administration, with new personnel, priorities and policy objectives.

The Task Force Report provides some very practical direction for regulations. But the recent emphasis on fair lending, which emerged after the Task Force began meeting and forming its recommendations, could influence the direction of things. The end result is a combination of more clarity and, at the same time, new uncertainty.

Honors for the #1 AVM Changes Hands

#1 AVM in each County for the last 8 quarters
Top AVM by county for the last 8 quarters shows a very dynamic market with constant lead changes.

We’ve updated our Top AVM GIF showing the #1 AVM in each county going back 8 quarters. This graphic demonstrates why we never recommend using a single AVM. There are 18 AVMs in the most recent quarter that are “tops” in at least one county!

The expert approach is to use a Model Preference Table to identify the best AVM in each region. (Actually, our MPT® typically identifies the top 3 AVMs in each county.)

Take the Seattle area for example. Over the last two years, you would almost always need two or three AVMs to cover the most populous 5 counties of the Seattle environs with the best AVM. However, it’s not always the same two or three. There are four of them that cycle through the top spots.

Texas is dominated by either Model A, Model P or Model Q. But that domination is really just a reflection of the vast areas of sparsely inhabited counties. The densely populated counties in the triangle from Dallas south along I-35 to San Antonio and then east along I-10 to Houston cycle through different colors every quarter. The bottom line in Texas is that there’s no single model that is best in Texas for more than a quarter, and typically, it would require four or five models to cover the populous counties effectively.

 

Demystifying home pricing models with Lee Kennedy

Earlier this year, Lee Kennedy appeared with Matthew Blake on the HousingWire Daily podcast, Houses in Motion:

They covered a number of topics in valuations, from iBuying to AVMs, including:

  • Democratizing the treasure trove of appraisal data that Fannie Mae maintains
  • The inputs into AVMs
  • What fraction of the housing market can effectively be valued by AVMs
  • How to use multiple AVMs effectively
  • What complexities Zillow was dealing with in their iBuying endeavor

 

Demystifying home pricing models with Lee Kennedy